15.

a. Using the value for C computed in question 12, compute the convexity adjustment for the two 25-year bonds assuming that the yield changes by 200 basis points

(
y∗ = 0.02).

b. Compute the estimated percentage price change using duration (as computed in question 11a) and convexity adjustment if yield changes by 200 basis points.

c. How does the estimated percentage price change using duration and convexity adjustment compare to the actual percentage price change for a 200 basis point change in yield?